RICHMOND — Chevron has struck a deal with labor unions that marks a major milestone in its quest to modernize its Richmond refinery in a project expected to cost $1 billion and create hundreds of jobs, the company and the employee groups said Friday.

The proposed upgrade at the vast century-old refinery, which is expected be opposed by some environmentalists, would enable Chevron to process a wider array of crude oils at the fuel factory and slash overall emissions in the process.

“This is a win-win for Richmond, for local workers and for apprentices,” said Greg Feere, chief executive officer with the Contra Costa Building and Construction Trades Council, a labor group. “Chevron is really going to make an effort to promote local hiring.”

Backers of the project hope updating and replacing older equipment with new technologies will make the refinery safer and to curb greenhouse gas emissions.

Chevron on Friday declined to disclose the cost of the refinery modernization, but people familiar with the project have placed the price tag at $1 billion.

Historically, the Richmond refinery’s primary capability has been to process light and intermediate crude oil. With shifts in oil prices, Chevron has sought to widen its capabilities.

The refinery upgrade will create 1,000 construction jobs, the company said. And Feere said each of those construction jobs will create 2.5 secondary jobs.

“Payroll clerks, estimators, engineers, material suppliers, all of these secondary spinoff jobs will go with this project,” Feere said.

Word of the refinery upgrade sparked criticism from an environmental activist, Antonia Juhasz, author of the book “The Tyranny of Oil.”

“It would be problematic if Chevron did start to refine heavier sulfur crude at the plant,” Juhasz said. “The refinery is already a major contributor to greenhouse gases in the state. Refining heavier crude would only make things worse.”

Environmental activists torpedoed a previous effort by Chevron to upgrade the refinery following a court ruling that negated a city environmental impact report that had cleared the way for the project.

City officials are working to produce a new environmental impact report, which is due to be released in early 2014. The city is expected to provide final approval by late 2014.

“The modernization project will create a newer, cleaner and safer refinery that is better for the community,” said Kory Judd, general manager of the Richmond refinery. “We look forward to partnering with labor to move the project forward in an open and transparent permitting process.”